For each of the following assets, indicate which of the...

For each of the following assets, indicate which of the monetary aggregates (M1 and M2) includes them:
a. Currency
b. Money market mutual funds
c. Small-denomination time deposits
d. Checkable deposits

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Key Concepts

Monetary Aggregates

Monetary aggregates are classifications used to measure the amount of money available in an economy at a given time. These categories, such as M1 and M2, help economists and policymakers analyze the liquidity and potential impact on economic activity by grouping monetary assets according to their ease of use as a medium of exchange.

M1 is a narrow measure of the money supply that includes the most liquid forms of money. It typically comprises physical currency, such as coins and banknotes, and demand deposits like checkable deposits that can be quickly and easily used for transactions without significant conversion delays.

M2 is a broader measure of the money supply that builds on M1 by including additional types of accounts that are less liquid but can be converted into cash relatively easily. This category includes various interest-bearing assets such as small-denomination time deposits and money market mutual funds, which, although not as immediately accessible as the components of M1, still play an important role in the overall money supply.

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